Boston, MA 05/12/2014 (wallstreetpr) – The Dixie Group, Inc. (NASDAQ:DXYN) shares are plummeting in mid-morning trading session by a high of 14.14% after the company announced plans to sell 2,500,000 shares of its common stock. The company has consequently given underwriters a 30 days option to purchase an additional 375,000 shares to cover for any over-allotments scenarios.
Proceeds from the offering will be used to cover for expenses under the general corporate purposes, as well as reducing balance under the revolving credit facility. Some of the funds accrued will be used to cover for borrowings that were made to cover recent acquisition of Atlas Carpet Mills. Wells Fargo Securities and Raymond James have been appointed as the running managers for the offering.
Challenges in Q1
The offering comes after the company experienced a difficult first quarter as a result of unavoidable external events and internal operations. January and February sales were negatively affected by a slow start up in the upgraded Color master dyer line and lower production levels. Operations in the two months were also disrupted poor weather conditions in the period affecting production and order entry distribution. Closures in the quarter are estimated to have added $1.1 million in direct costs.
The Dixie Group, Inc. (NASDAQ:DXYN) accepts that despite facing a challenging quarter, enough was not done to mitigate rising costs. The company has now undertaken actions aimed at increasing profitability through improved operational performance and stringent cost control measures. Despite increased challenges in the quarter, sales were up by 13.1% and 10.9% without sales from Atlas Carpet Mills.
Dixie Investing in New Products
Weather related problems impacted The Dixie Group, Inc. (NASDAQ:DXYN)’s operating margin. Gross profit, as a result, was down to 21.1%, from 24.4% for last year. During the quarter Dixie acquired Atlas Carpet Mills, a producer of commercial soft floor covering. This resulted in the company integrating a $1.5 million facility consolidation plan for the integration of Atlas dye house.
Working capital for the quarter grew by $12.3 million at the back of Atlas acquisition with capital expenditures for the period coming in at $4.3 million. The Dixie Group, Inc. (NASDAQ:DXYN) continues to invest in new products having expanded its workforce and tufting new technologies for future growth opportunities.
